Auto woes put brakes on housing

The Chicago Tribune reports:

"I am in real estate hell," said Tom Cavanaugh, who divides his time between an apartment in Los Angeles and the Detroit suburb of Northville, where he and his wife built a four-bedroom home for $500,000 nine years ago.

An early retiree from Ford, Cavanaugh and his wife, Lynne, both 58, would like to move to New Mexico to be closer to family.

However, since putting their home up for sale last May, they have cut the asking price twice--from $590,000 to $525,000--and have yet to receive an offer.

Cavanaugh is stuck in Detroit's stalled housing market, where inventory is growing, foreclosures are up and buyers are few.

Blame the staggering auto industry, a bellwether for the nation's manufacturers, which is cutting factories and jobs and seeing its suppliers shrivel up and die.

The announcements last fall that Delphi Corp., a major parts supplier to General Motors Corp., was filing for bankruptcy and that GM and Ford Motor Co. would eliminate 60,000 jobs over the next several years have sucked the air out of the southeastern Michigan market.

The job loss threat is also playing havoc with other Midwest industrial markets. It is a powerful indicator of the impact on the American economy of the convulsions taking place in the unionized auto business, which is centered in the Midwest.

Michigan, Ohio and Indiana ranked 48, 49, and 50 out of all U.S. states and the District of Columbia in price appreciation for the year ended June 30, 2005, said housing consultant Tracy Cross. Only Texas saw lower appreciation.

In the long run incomes and jobs really do affect the price of real estate.How much lower could Detriot area real estate go? Below perceived value which is much lower.